Tag: investing

Fractional ownership offers entrée to million-dollar vacation homes for far less money than buying outright—but financing options may be limited.After doing the math, some homeowners are set on fractions.

On a trip to affluent ski town Steamboat Springs, Colo., in March, Dennis and Pamela Stearns discovered One Steamboat Place, a Timbers Resorts development that offers fractional ownership of luxury vacation properties. The couple, whose primary home is in Greensboro, N.C., were intrigued by the thought of a second home without the maintenance hassles. Fractional ownership with Timbers Resorts also enables the Stearns and their two young daughters to stay in luxury properties elsewhere. “We didn’t want to feel like we had to go to the same place all the time to justify having it,” says Ms. Stearns.

Fractional real-estate ownership differs somewhat from timeshares. It typically applies to high-end properties, and ownership is split among fewer people. Periods of annual usage are typically three to four weeks rather than one to two, and privileges may extend to more than one luxury property. Another draw is concierge-level services that a guest would receive at a luxury hotel.

Like deeded property owners, fractional owners can sell their stake, leave it in a will or put it in a trust. Fractional owners pay a share of property taxes as part of their annual dues, ranging from $8,100 to $21,000, depending on the property, which also covers their concierge services and utilities. Some borrowers are able to write off mortgage interest on their taxes. On the down side, owners who want to make changes to the property are limited.

As soon as the sale of his company was announced in 2012, Mike Zhang, who was barely above the legal drinking age at the time, started getting a flood of phone calls.

Wealth managers from some of the largest Wall Street firms — including Goldman Sachs, Merrill Lynch and Credit Suisse — started pursuing the freshly minted millionaire. Some even sent him gifts in an effort to woo his business.

But Zhang, now 23 years old, was turned off by their approach.

“When I have a rainy day, I don’t want to talk to an opportunist,” he said.

Zhang instead turned to Andrew Palmer, a managing director at Bel Air Investment Advisors. The two had met in the summer of 2011 at an event where Zhang was being honored with an entrepreneurship award for his success as the founder and CEO of Airsoft Megastore, an online store for lifelike toy guns and plastic BBs used in simulation combat competitions known as airsoft games. It’s sort of like paintball.

He started the company in 2004, when he was just 14, after returning from a trip visiting relatives in China. Zhang found that the airsoft guns and gear were selling for much less in China than they were in the U.S. He convinced his parents to let him import products from China and sell them online.